Lawmakers introduce last-minute budget maneuvers for more financial flexibility as session draws to a close

Despite the sound and fury that accompany the end of every legislative session, lawmakers only have one actual constitutional requirement to fulfill before the end of the 120 days of session — pass a balanced state budget.

Closing a roughly $9 billion budget is rarely an easy task, and 2021 has brought a host of new challenges — better-than-expected tax revenue forecasts, a coming windfall of $2.7 billion in federal American Rescue Plan dollars and a major state Supreme Court ruling on extended payroll tax and DMV fees blowing a roughly $200 million hole in the budget. 

During the final week of the legislative session, budget committees have introduced several bills aimed at providing more financial flexibility for legislative priorities — measures sometimes derided as budget “gimmicks” aimed at freeing up tens of millions of dollars to help balance the budget. These include measures extending a $1-per-DMV-transaction technology fee until 2026 after a previous iteration was ruled unconstitutional, and suspending a required money transfer to the state’s Rainy Day Fund.

Here’s a closer look at the last-minute budget moves being considered by lawmakers:

DMV fee extension, Highway Fund extension

Members of the Assembly Ways and Means Committee on Tuesday discussed AB488, which extends the $1 DMV technology fee through June 2026 and retroactively permitting the fee from the end of June 2020 onward.

The previous extension in 2019 was recently ruled unconstitutional by the Nevada Supreme Court because it increased collection of public revenue but did not pass out of each house of the Legislature with a two-thirds majority. It fell one vote short of that threshold in the Senate back in 2019.

Following that ruling, the DMV now lacks a dedicated revenue source to fund IT upgrades meant to shift more transactions online and make DMV interactions easier for the public. The state also has to refund the technology fees assessed during the time that the fee was unconstitutionally extended. During the Tuesday hearing, legislative staff said the state owes approximately $5.5 million in refunds.

Through AB488, lawmakers are seeking to (with a two-thirds majority in each house) reinstate that funding source for the IT upgrades and eliminate the need to refund the millions of $1 fee charges to motorists. Assemblywoman Maggie Carlton (D-Las Vegas), who chairs the money committee, noted that processing and disbursing the refunds could be more expensive than the refunds themselves.

“It's a $5 million refund, and it's going to cost us $8 million to give it back. And that impacts other services in the state,” she said. “I believe it is our responsibility to weigh those as we move forward and make the best decision that we need to make for the people of the state.”

Carlton also said that the refunds could be especially costly if the department were to use a back-credit process programmed through its own systems, following a suggestion from Assemblywoman Jill Tolles (R-Reno).

“The programming involved, in the investigations that we have done, could cost even more than the actual refund itself,” Carlton said. “You're basically putting the refund on steroids by trying to do all the programming … so don't ever go down the programming road with DMV because it is a very long, twisty, dark, scary road.”

However, the measure faces steep opposition from some Senate Republicans, who filed the lawsuit against the original extension of the fee.

In an atypical move, Sens. James Settelmeyer (R-Minden) and Keith Pickard (R-Henderson) both testified against the bill during the contentious Tuesday hearing.

“Judgment has been entered by the District Court in favor of the plaintiffs in the two-thirds case and, in particular, the judgment in favor of the taxpayers and the fee payers,” Settelmeyer said. “I don't want to belabor this point. I'm tired of litigation. People deserve their money back.”

At roughly the same time on Tuesday, members of the Senate Finance Committee discussed and unanimously passed SB457, a measure that allows the DMV to use a greater percentage of highway funds to replace the DMV’s current technology and bring the majority of DMV services online over the course of the next four years.

The bill would increase the percentage of highway funds the DMV could use for administrative costs from 22 to 27 percent, and though the bill originally would have applied to the 2020-2026 fiscal years, a conceptual amendment made it so the bill only applies to fiscal years 2022-2026.

“During the pandemic, it became clear to us that [bringing DMV services online] needed to be our number one goal, as was the same with many businesses and state agencies,” said Julie Butler, the Director of Nevada Department of Motor Vehicles. “This bill is needed to continue our progress on this critical project for the department and for the state of Nevada.”

But, when DMV representatives said they did not expect to go above the 22 percent threshold for fiscal year 2020-2021, Sen. Ben Kieckhefer (R-Reno) noted that the retroactive provision seemed unnecessary.

“I would understand the need to increase it to 27 percent in the upcoming biennium, but for our current biennium. If we weren't going across over 22 percent the retroactive piece seems unnecessary,” Kieckhefer said.

Rainy Day Fund transfer suspension 

Members of the Assembly Ways & Means Committee on Tuesday also discussed AB487, which suspends an automatic transfer of 1 percent of the state’s projected revenue to the Rainy Day Fund for each of the next two fiscal years.

The suspension is intended to give lawmakers more financial flexibility ahead of the finalization of the state’s budget as the state awaits federal funds from the American Rescue Plan.

“We know there are dollars coming,” said Carlton. “But we also know that we have to fund the government by May 31, so we can't pretend that money is going to be there. We have to actually use real money that is available right now.” 

According to projections from the Economic Forum in May, the amount of money that would no longer be transferred to the Rainy Day Fund if the bill is passed is $43.4 million in the upcoming fiscal year and $46.4 million in the following year, meaning lawmakers could have approximately $90 million in additional funds to spend before the session ends.

Lawmakers will be unable to backfill the fund with federal dollars, though. Spending guidance from the U.S. Treasury released earlier this month indicates that states will not be allowed to deposit American Rescue Plan funds into their reserve accounts.

Shortly after the hearing, the bill was voted out of the committee on Tuesday and awaits a vote on the Assembly floor.

Reporter Riley Snyder contributed to this report.